Amazon.com (NASDAQ:AMZN) is finally operating an air cargo network after leasing 20 planes to serve its customers in the United States.
It was reported in December that the e-commerce giant was negotiating with Air Transport Services Group (NASDAQ:ATSG), Atlas Air and Kalitta Air to lease 20 Boeing 767 freighters.
Today, ATSG announced that Amazon Fulfillment Services, a subsidiary of the e-commerce giant, signed commercial agreements to lease 20 Boeing 767 freighters. The deal also included gateway and logistics services by aircraft-leasing company’s LGSTX Services.
In a statement, ATSG President and CEO Joe Hete said, “Since last summer, we have been working closely with Amazon to demonstrate that a dedicated, fully customized air cargo network can be a strong supplement to existing transportation and distribution resources. We are excited to serve Amazon customers by providing additional air cargo capacity and logistics support to ensure great shipping speeds for customers.”
According to ATSG, the duration of the 20 aircraft leases will be five to seven to seven years. The agreement covering the operation of the aircraft will be for five years.
ATSG also granted Amazon rights to acquire up to 19.9% of its common stock at $9.73 per share over five years.
Amazon ensures one and two-day delivery for customers
Dave Clark, senior vice president of worldwide operations and customer service at Amazon, said the e-commerce giant is offering the largest selection with great prices and promises fast delivery to its growing Prime members. According to him, adding 20 planes to its delivery network ensure Amazon’s one and two-day delivery to customers.
On the other hand, Kelly Cheeseman, senior manager of communications at Amazon, said, “These planes provide critical capacity expansion to support the growth of Prime in the US. Planes provide an additional dedicated transportation method connecting Earth’s largest selection to customers from coast to coast. At our scale, supporting growth requires adding some of our logistics capabilities.”
According to Cheeseman, the e-commerce giant will start the operations of the 20 leased Boeing 767 freighters on April 1.
Amazon was tired of depending on other carriers
John Haber, CEO of Spend Management Experts, a supply-chain management consulting firm based in Atlanta, commented that Amazon was already tired of “having its hands tied and relying on other networks” to deliver its massive volumes of products.
RBC Capital Markets analyst John Barnes believed that Amazon’s decision to operate an air cargo business brings an “incremental negative” for FedEx Corporation (NYSE:FDX) and United Parcel Service (NYSE:UPS) citing the reason that it will likely eliminate some higher yielding express freight and parcel volume from both companies.